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SELF-EMPLOYMENT can be hard enough without further complications, so if you’re on a low income and need a little extra support you could apply for working tax credit and child tax credit.
All you need to do is declare your previous year’s income and each year when you submit your tax return renew your tax credit claim.
Your entitlement is based on your previous year’s income over the whole year. Any entitlement is awarded accordingly, and it’s a weekly or four-weekly regular amount that allows you to budget for the year ahead. Nice and simple — but it’s about to get much more complicated.
Universal credit has been rolled out in many areas, with a commitment to move all claimants to the one-benefit system by December 2023.
It’s already having a devastating impact on working single parents, especially women, who recently won a High Court case against the government due to how income is assessed.
Universal credit has been a catastrophic blow to families who have often had to wait longer than six weeks for a payment, and it has led to an increase in homelessness and even deaths.
It has been dubbed as calculated cruelty, but the roll-out continues — and next in line to suffer are the self-employed.
So what is going to happen when you are switched over to universal if you are self-employed?
First, you will be asked to attend a “gateway interview” — during working hours — at your local jobcentre before your claim can be processed.
They will go through a number of questions about your business plan, marketing, future plans and work in the pipeline.
It’s worth recognising at this point that many self-employed people are still accountable to someone. Many companies exploit workers as self-employed to avoid paying minimum wage, pensions and national insurance contributions — another symptom of the gig economy.
Ultimately if you are responsible for your own tax and NI and file a tax return to HM Revenue and Customs then you are self-employed.
It’s not always easy to leave work commitments to attend an interview no matter who employs you.
If your self-employment brings in low (no specified amount) or no income, then it will be determined if you are doing enough to improve the situation or if the business is a going concern.
A decision will be made. If you are deemed not gainfully self-employed then you must actively seek gainful employment to replace self-employment or to make up the difference. During this time any income you make from your self-employment you must report, and this will be considered while calculating any universal credit.
If it is accepted that you are “gainfully self-employed” you must submit all your income and expenditure every month before the end of the assessment period. Failure to do so will result in your claim being cancelled.
However, this is where it gets complicated. Your claim will not be calculated against the figure of your earnings/profit unless it is above the “minimum income floor” (MIF). This is what you could earn if you were employed at the number of hours it is agreed at your gateway interview that you are available for work, calculated using the minimum wage, less tax and NI.
If you earn above this amount your earned figure will be used to calculate any entitlement. If you earn below then your MIF will be used to calculate your entitlement.
The only time the MIF doesn’t apply is the first 12 months of self-employment, yet it is widely known that it can take much longer than a year to start turning a profit.
Universal credit is a system designed to underpin the precarious, insecure “gig economy.” Self-employment does not guarantee a regular monthly wage, and many are paid sporadically — contractors, self-employed teachers, musicians, taxi drivers, delivery people, the list is exhaustive.
So, two months with a high income you will get much less, possibly nothing, but if this is followed by two months with a very low income you will not get any more as your income will be measured on what you “could” earn MIF.
Ironically, people will be left with no other option than to cease self-employment look for full-time work, quite possibly resulting in a zero-hours contract, earning even less than they were self-employed and receiving more financial support from the government.
The hypocrisy of this system is blatantly obvious. The government is not only allowing, but subsidising, more often than not, hugely profitable companies to employ staff on zero-hours, precarious contracts, often working a couple of hours here with several employers and classing this as “gainful employment” (even with a zero-hours contract you are classed as employed).
But if the working person wants to try to support themselves and create their own employment they do not qualify for the same support, because they could potentially earn the MIF if they can secure a full-time permanent job. However, the changes are slim. Just how can a social security system designed to reduce hardship and poverty be calculated on what you could potentially earn, as opposed to what you do earn?
It is evident that this is another ideology in place to maintain and uphold a capitalist society. People who strive to succeed by themselves are demoralised and put back in their place, while those at the top are subsidised to exploit their workforces.
Universal credit is a cruel, stark warning of what the Tories are capable of. Be in no doubt about it, this government is only interested in serving the few and deceiving the many.
If you want to get involved in the fightback against universal credit, then you can contact your trade union and/or your local People’s Assembly Against Austerity group to see what grassroots campaigns you can get involved in.
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